Financial experts say a single person needs more than £45,000 a year after tax to live comfortably in retirement, yet official Government data shows the average retirement income in the UK is around £33,800 before tax, or £29,555 after tax. For women, the challenge is particularly acute: only 27 per cent are on track for a comfortable retirement according to the latest Women & Retirement report published by Scottish Widows, with a third facing poverty. Yet the gap between what people are told they need and what many actually live on is far wider than these figures suggest.
Pensions UK, a lobby group, bases its comfortable retirement standard on Retirement Living Standards data and says £45,400 a year post-tax allows a single person to run a small car, take a two-week Mediterranean holiday and three UK weekend breaks annually, plus cover home maintenance, clothes, weekly shopping, eating out and gifts. However, insurer Legal & General backed a survey of 3,000 representative UK retirees which found the happiest retirees are those on a post-tax income of £1,700 or more a month for an individual, or £20,400 a year. That is £25,000 a year less than the Pensions UK figure.
Beverly Parker, 73, from Bromsgrove, Worcestershire, lives on just £17,000 annually from her state pension and a small Scottish Widows pension, enjoying what she describes as a big life. She has no mortgage or debt, drives a 12-year-old Mazda and pays £46 a year for AA breakdown cover within a 26-mile radius. She enjoys meals with friends at local restaurants using discount schemes and takes three or four coach trips a year around the UK. Richard Rutherford, 67, a former civil servant from Sevenoaks in Kent, lives on an annual income below the £45,400 comfortable retirement threshold but keeps tight control of spending by shopping at charity shops, buying buy-one-get-one-free offers and purchasing supermarket items at half price after five o'clock.
Clare Moffat, a pensions and tax expert at financial mutual Royal London, says the Retirement Living Standards figures are just a guide. She explains: 'At the end of the day, we are all individuals with different retirement needs. The key is to ensure that as we approach retirement, we have enough in our financial armoury to cover our likely spending in later life.' Sara El-Sharawy, a 70-year-old maths teacher, moved from Hastings to Eastbourne last April and believes quality of life matters as much as income. She cycles everywhere, swims and runs dance events. She says: 'Sometimes, our wealth is as much the things around us as the size of retirement income coming into our bank account.'
For many savers and borrowers in the UK, these examples challenge the assumption that retirement requires high income, suggesting that careful spending and debt-free living can deliver contentment on modest pensions well below expert recommendations.